Estonia issues €200 million in treasury bills

The State Treasury auctioned off a record sum in treasury bills on Monday.
The State Treasury auctioned off a record sum in treasury bills on Monday. Source: Siim Lõvi/ERR

For the first time ever, the State Treasury of Estonia sold €200 million worth of treasury bills with a negative yield at auction on Monday.

A negative yield means that the buyer of treasury bills is to pay interest to the State Treasury, the Ministry of Finance said.

Participators in the auction included LHV, Luminor, SEB and Swedbank. The bidder offering the most favorable interest rate for the state will win the right to buy the debt instruments.

The Treasury auctioned €100 million worth of treasury bills for six months with an average yield to maturity of -0.063 percent and another €100 million for 12 months with an average yield of -0,19 percent.

The bonds are registered with the Nasdaq CSD SE Estonian Depository.

The Ministry of Finance confirmed the framework for the issuance of treasury bills for cash management purposes in April this year, which, if necessary, will allow the Treasury to use bonds with a maturity of up to one year.

Compared to standby loans issued by banks, treasury bills provide a more affordable supplementary instrument for cash management.

The State Treasury's monthly cash flow varies by several hundreds of millions of euros — a large number of payouts are made at the beginning of the month, whereas much of the income is received after major outlays have been financed. The State Treasury must also guarantee liquidity in the event of exceptional occurrences.

State to save on fees

The State Treasury has previously concluded agreements on standby loans with banks, which entail a fee. With the framework for the use of short-term debt instruments, however, the state does not incur any running costs.

A short-term treasury bill framework document has been adopted in most countries worldwide, and serves as the main instrument for short-term cash flow management by granting access to the widest circle of investors. It is also possible to choose the size of the loan and the repayment deadline as needed.


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Editor: Aili Vahtla

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